Citi’s London Bankers and Traders Facing Compensation Issues
If you’re a senior banker or trader in London now, these are exciting times. The bonus cap has been lifted. Bonus deferrals will be lower, and fewer people in banks will now be classified as material risk-takers governed by compensation regulations. All this should come into effect for the imminent bonus round.
However, the lifting of the bonus cap is also creating problems. And Citi’s Canary Wharf office appears to exemplify the issues.
A Two-Tier Compensation System at Citi
At Citi, insiders in London say a two-tier compensation system has emerged since the lifting of the bonus cap. On one tier are the bank’s historic material risk-takers, who are on the old bonus-cap compensation structure. On the other are the new material risk-takers, who are not.
Citi paid its senior London bankers very high salaries in the old bonus-cap days to mitigate the fact that bonuses were limited to twice fixed pay. Unlike other banks, it didn’t pay flexible allowances that varied with performance. Instead, Citi would recalibrate its very high salaries every year, sometimes adjusting them down.
Compensation Disparities
This year, however, insiders say that Citi didn’t recalibrate salaries for its senior bankers and traders. Citi’s very long-tenured managing directors in London are therefore collecting very high cash salaries with no consideration of performance. Their 2025 bonuses are likely to be small as a result.
By comparison, newly promoted managing directors and directors at Citi are understood to be on lower salaries, which have been rebased to reflect their higher bonus potential in the absence of the bonus cap. In the new world, Citi is paying bonuses of up to 6x salary.
Because Citi’s new MDs are being paid predominantly through bonuses instead of salaries, insiders say there’s also fear that they will bear the brunt of bad years in which the bonus pool is reduced.
Concerns and Suspicions
There are suspicions that many of Citi’s historic MDs will receive no bonuses at all this year if they are not favored by Vis Raghavan. “There’s very much an us and them culture,” says one insider, referring to Raghavan’s various hires from JPMorgan.
A spokeswoman for Citi said that the changes to the compensation structure are aimed at offering competitive pay, attracting top talent, and encouraging behaviors that benefit customers, shareholders, and the organization’s goals.
If you would like to read more about the issues faced by Citi’s London bankers and traders, you can find the original article here.
